Deemed dividend treatment of opening balance requires ledger verification and fresh inquiry before addition can stand.

Opening balance in a company ledger cannot be treated as deemed dividend under section 2(22)(e) without verifying whether it represents a loan advanced during the relevant year. The assessee produced additional ledger material indicating an earlier opening balance, and the record before the assessing authority was incomplete. The matter was therefore sent back for fresh examination, with an opportunity to produce the ledger account and related evidence, and with liberty to the assessing authority to make further inquiry on the new material.

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Issues: Whether the addition treating the assessee's opening balance as deemed dividend under section 2(22)(e) of the Income-tax Act was sustainable.

Analysis: The dispute turned on whether the opening balance in the assessee's ledger with the company could be treated as a loan advanced during the relevant year. The assessee produced additional ledger material showing an earlier opening balance, indicating that the amount relied upon by the assessment order required verification with the current-year ledger and related records. As the relevant evidence was not before the assessment authority, the matter required fresh examination with an opportunity to the assessee to produce the ledger account and with liberty to the assessing authority to make inquiry on the fresh material.

Conclusion: The addition was set aside to the assessing authority for fresh adjudication and the ground was allowed for statistical purposes.

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